[Federal Register Volume 72, Number 145 (Monday, July 30, 2007)]
[Notices]
[Pages 41501-41502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-14681]


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DEPARTMENT OF DEFENSE

Office of the Secretary


Expansion of a TRICARE Demonstration Project for the State of 
Alaska

AGENCY: Department of Defense.

ACTION: Notice of expansion of a TRICARE demonstration project for the 
State of Alaska.

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SUMMARY: This notice is to advise interested parties of an expansion of 
a Military Health System (MHS) demonstration project entitled TRICARE 
Provider Reimbursement Demonstration Project for the State of Alaska. 
The original demonstration notice was published on November 20, 2006 
(71 FR 67112-67113) and described a demonstration project to increase 
reimbursement for individual providers in the State of Alaska. The 
demonstration project will now also include increased reimbursement for 
health care services by hospitals that have been designated as Critical 
Access Hospitals (CAH) in the State of Alaska. TRICARE, under the 
demonstration project, will reimburse CAHs in a similar manner as they 
are reimbursed under Medicare. The expansion of the demonstration 
project will test the effect of this change on CAH provider 
participation in TRICARE, beneficiary access to care, cost of health 
care services, military medical readiness, morale and welfare. In 
particular, the demonstration will test whether the increased costs of 
provider payments are offset in whole or part by savings in travel 
costs, lost duty time, and other factors. This demonstration will be 
conducted under statutory authority provided in 10 U.S.C. 1092.

DATES: Effective Date: The expansion of the demonstration will be 
effective July 1, 2007, and will continue for a period of 3 years from 
the date of the original demonstration.

ADDRESSES: TRICARE Management Activity (TMA), Medical Benefits and 
Reimbursement Systems (MB&RS), 16401 E. Centretech Parkway, Aurora, CO 
80011.

FOR FURTHER INFORMATION CONTACT: For questions pertaining to the 
expansion of the demonstration/Critical Access Hospital portion of the 
demonstration, Ann N. Fazzini, 303.676.3803.

SUPPLEMENTARY INFORMATION:

A. Background

    For additional information on the TRICARE demonstration project for 
the State of Alaska, please see 71 FR 67112-67113. The demonstration 
notice focused on increased payment rates for individual providers to 
determine the impact on access to care.
    This expansion of the demonstration applies to Critical Access 
Hospitals (CAH) within the State of Alaska. Hospitals are authorized 
TRICARE institutional providers under 10 U.S.C. 1079(j)(2) and (4). 
Under 10 U.S.C. 1079(j)(2), the amount to be paid to hospitals, skilled 
nursing facilities (SNFs), and other institutional providers under 
TRICARE, shall, by regulation, ``shall be determined to the extent 
practicable in accordance with the same reimbursement rules as apply to 
payments to providers of services of the same type under Medicare.'' 
Under 32 CFR 199.14(a)(1)(ii)(D)(1) through (9) it specifically lists 
those hospitals that are exempt from the DRG-based payment system. 
Critical access hospitals are not listed as excluded, thereby making 
them subject to the DRG-based payment system. Critical access hospitals 
are not listed as exempt, because at the time this regulatory provision 
was written, CAHs were not a recognized entity.
    Legislation enacted as part of the Balanced Budget Act (BBA) of 
1997 authorized states to establish State Medicare Rural Hospital 
Flexibility Programs, under which certain facilities participating in 
Medicare could become Critical Access Hospitals (CAHs). CAHs represent 
a separate provider type with their own Medicare conditions of 
participation as well as a separate payment method. Since that time, a 
number of hospitals have taken the necessary steps to be designated as 
CAHs. Since the statutory authority requires TRICARE to apply the same 
reimbursement rules as apply to payments to providers of services of 
the same type under Medicare to the extent practicable, TRICARE has the 
authority through the publication of a proposed and final rule to 
exempt critical access hospitals from the DRG-based payment system and 
adopt a method similar to Medicare principles for these hospitals. The 
purpose of the demonstration is to provide this exemption immediately 
to CAHs in the State of Alaska.
    Currently under TRICARE, CAHs are subject to the TRICARE DRG-based 
payment system. Under the demonstration project, CAHs will be 
reimbursed under a manner similar to the Centers for Medicare and 
Medicaid Services (CMS) payment methodology of 101 percent of 
reasonable costs for inpatient care and outpatient care. CAHs in the 
State of Alaska are currently receiving reimbursement for billed 
charges for facility charges for outpatient care. Under the 
demonstration, the 101% of reasonable

[[Page 41502]]

costs will be calculated by multiplying the billed charge of each claim 
by the hospital's cost-to-charge ratio, and then adding 1% to that 
amount.

B. Current Status of Access

    CAH providers in Alaska have notified the Department that they are 
considering no longer treating military beneficiaries due to low 
payment rates. The alternatives to local purchase of services for 
military officials are to transport patients to Seattle or another 
location for treatment, or to relocate scarce military medical assets 
to Alaska to provide services. The first is an expensive proposition 
that brings with it considerable lost duty time and other 
complications; the second approach is untenable in wartime, and as a 
practical matter medical practice in Alaska would not provide 
sufficient opportunity for military medical specialists to maintain 
their skills.

C. Description of Expansion of Demonstration Project

    Under this demonstration, DoD will also waive, for services 
provided in the State of Alaska, the provisions of 10 U.S.C. 
1079(j)(2), as implemented by 32 CFR 199.14(a) that do not exempt CAH 
providers from the Medicare Diagnostic Related Group payment 
methodology for inpatient services. Instead, CAHs will be reimbursed 
under the Centers for Medicare and Medicaid Services (CMS) payment 
methodology of 101 percent of reasonable costs for inpatient care and 
outpatient care.
    This action will directly increase overall reimbursement levels for 
CAH providers, and is expected to result in increased access to care 
for military beneficiaries; reduced travel to Seattle, accompanied by a 
reduction in lost duty days; and improved morale for military members 
and families as a result of increased access and reduced separation.

D. Implementation

    The expansion of the demonstration will be effective for inpatient 
admissions on and after July 1, 2007 and for outpatient services 
provided on and after July 1, 2007.

E. Evaluation

    An independent evaluation of the demonstration will be conducted. 
The evaluation will be designed to use a combination of administrative 
and survey measures of health care access to provide analyses and 
comment on the effectiveness of the demonstration in meeting its goal 
of improving beneficiary access to healthcare by maximizing the 
potential pool of healthcare providers in Alaska.

    Dated: July 24, 2007.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, DoD.
 [FR Doc. E7-14681 Filed 7-27-07; 8:45 am]
BILLING CODE 5001-06-P